Abstract

This paper shows that globalization shocks have far-reaching implications for the economy’s fertility rate and family structure because they influence work-life balance. Employing population register data on marriages, divorces and births together with employer-employee linked data for Denmark, we show that lower labor market opportunities due to Chinese import competition lead to a shift towards family, with more parental leave taking and higher fertility, as well as more marriages and fewer divorces. This pro-family, pro-child shift is driven largely by women, not men. Correspondingly, the negative earnings implications of the rade shock are concentrated on women, thereby increasing gender earnings inequality. We show that the choice of market versus family is a major determinant of worker adjustment costs to labor market shocks. While older workers respond to the shock rather similarly whether female or not, for young workers the fertility response takes away the advantage in shock adjustment that they typically have–if the worker is a woman. We find that the female biological clock, that women have difficulties to conceive beyond their early forties, is central for the gender differential, rather than the composition of jobs and workplaces, and other potential causes.